The California Department of Real Estate (DRE) conducts investigations of real estate brokers and salespeople, typically in response to consumer complaints about real estate transactions. DRE analysts and investigators conduct investigations, while DRE auditors conduct audits of licensees’ bank accounts and financial records.

A real estate broker or salesperson will usually find out about a Department of Real Estate investigation by receiving a letter or email from a Department of Real Estate investigator asking for information about a specific transaction or transactions. Most often, the investigator will mail or email an investigation letter. Typically an investigation letter may include the following components:

  • a description of the real estate property involved,
  • if the investigator does not already have the transaction file, a request for the transaction file under Business and Professions Code section 10148,
  • specific questions about the transaction, and
  • a request for a written chronological narrative (also called a timeline) about the transaction.

A DRE audit, in contrast, usually begins with a phone call or an email from an auditor to schedule an entrance conference. Department of Real Estate audits are always conducted with Real Estate brokers (not salespersons). A DRE audit entrance conference is the initial meeting with the auditor. Once an audit entrance conference is scheduled, the auditor sends the real estate broker a form RE 4501 letter that outlines the parameters of the audit. Audits typically review trust accounts, such a property management accounts or broker escrow accounts.

Real estate brokers and salespersons who receive investigation letters would be wise to retain experienced legal counsel to respond to DRE. The information gathered in a DRE investigation can determine whether a disciplinary case, commonly known as an accusation, is brought. An experienced licensing attorney can identify the legal issues involved in the investigation to effectively respond to the investigator.

Real estate brokerage audits are complicated and intrusive experiences. DRE auditors follow a pre-defined process to examine the records of a real estate brokerage for compliance issues. An attorney experienced in audits can help the broker identify and correct compliance problems, protect the rights of the real estate broker, and can bring in needed forensic expertise to identify trust account problems.

Ray & Bishop, PLC, is experienced in defending real estate brokers in DRE audits and investigations, and represents real estate salespersons in DRE investigations. If you have received notice of a DRE investigation or audit, contact us to see if we can assist you with your legal issue.